Black and Buono Blog

As we head toward another recession, (many homeowners in Massachusetts will say we never left the last one), there are some disturbing credit facts out there I’d like to bring to your attention:

According to Equifax, nearly 15 million new credit cards were issued in the first five months of 2011, a three-year high.

Banks gave 4.4 million cards to consumers with poor credit histories, a 65% increase during that same time period last year.

Consumer confidence is declining and the fear is that more Massachusetts families will rely on credit cards to wade through this economic downturn.

As humans we do have short memories, but try to recall that credit card overspending is what got us here in the first place. Of course, for awhile in 2008-9 no one could get credit, but credit card companies are lending again. If you rely on credit cards to pay for necessities, you could be getting yourself into trouble.

It is really easy to spend when you want something and there are no immediate consequences. But those bills pile up. If you are in debt of around $20,000, and you are only paying the minimums on your credit cards, you may need to seek credit help.

There is a correlation between rising credit card debt andbankruptcies. As consumers use credit cards to supplement their income, bankruptcies rise.

It is important to track your spending and make a budget. If you can’t pay in cash, then don’t buy it. Credit cards should not be used to pay bills; they should be used only for emergencies. If you are using your credit cards to pay bills then there is a problem that needs to be addressed.

Bankruptcy filings by individuals are off sharply this year compared to 2010, reflecting a modest improvement in household finances in Massachusetts.

During the first six months of 2011, Chapter 7 bankruptcy filings dropped to 7,733 filings, down about 20 percent from 9,411 filings during the first six months of 2010.

Business bankruptcies, however, are on pace with 2010 numbers. During the first six months of this year there were 111 Chapter 11 filings, compared to 105 filings during the first six months of last year.

Chapter 7 filings usually involve liquidation and are used by individuals or families and, sometimes, companies that fail to right their courses through Chapter 11 proceedings.

Nationally, the number of personal bankruptcy filings dropped 6 percent during the first quarter of 2011.
While unemployment is still high, creditor pressure has eased to some degree as foreclosures have dropped in recent months.

The declining number of personal bankruptcies may also simply be because during the worst of the recession, many people filed and the people left are more stable financially — or they’re just trying to hold on as the economy gradually improves.

The bankruptcy epidemic has affected a wide variety of households, from people in their prime earning years who are struggling after layoffs to retirees who are no longer able to pay their mortgages.

In Massachusetts, the total number of Chapter 7 and Chapter 13 personal bankruptcy filings rose to nearly 23,000 last year, up 16 percent from 2009. Nationally, personal bankruptcy filings rose 9 percent over the same time.

A 33-year-old administrator at a residential treatment facility for at-risk teens had never fell behind on his bills. But the purchase of a condo in Abington during the height of the real estate bubble proved to be disastrous for him.

He bought the condo in 2005 with a friend as an investment and short-term living arrangement, using an interest-only mortgage that became an adjustable rate mortgage after five years.

As the economy lurched into recession, both took pay cuts and David’s roommate lost his job. Hoping to force the lender to modify the loan, the pair stopped paying the mortgage for nearly three years. They finally settled on a short sale, a process that left them with a $90,000 debt. “Unfortunately, like a lot of people we ended up with a mortgage that was set up for failure,” he said.

The bankruptcy epidemic has cut across all circles, but what’s changing is the demographics, local bankruptcylawyers say.

For the first time, we’re seeing a great deal of elderly people inbankruptcy, before 2007, we didn’t.

One lawyer recalled a woman nearing her 90th birthday who begged him to take her case so that she could pass on a clean estate to her family.

While job loss remains the biggest trigger for a bankruptcy filing, the second-biggest category is people entering retirement.

Their income is greatly reduced and they can no longer afford credit card payments and in some cases their car payments.

There has also been an increase in higher-income clients seeking bankruptcy because of job loss or reduced income.

Bankruptcy cases fell sharply in 2005 after enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act. The federal law was intended to curb abuse and fraud of the bankruptcy process by debtors and force more debtors to pay back their creditors.

It did so by making it harder to file for Chapter 7 bankruptcy, a straight liquidation process, as opposed to Chapter 13, in which the debtor is required to pay back at least some of the debt over a three- to five-year period.
Under the new bankruptcy laws, debtors who make more than the local median income are required to file for Chapter 13.

The law also imposed new requirements on debtors and their attorneys. Debtors are required to take credit counseling and financial management courses before their case can be discharged by the court.

Lawyers, for their part, are now required to verify their clients’ financial statements and assets. That has created more paperwork and increased attorneys’ fees. A typical Chapter 7 case, which takes approximately three months to make its way through the courts, costs a consumer $1,000 to $2,500, Nielson said. Chapter 13 cases are capped at $3,500 unless the court approves additional expenses.

But what the new law has failed to address is the root cause of many bankruptcy filings: loose credit standards that enabled borrowers to obtain bigger mortgages and credit lines than they can afford.

Although bankruptcy filings linger on a person’s credit report for 7 to 10 years, they can take steps to rebuild their credit.

One method is a secured credit card, in which a debtor deposits money as collateral to serve as the credit line. That enables them to establish a history of payments.

At Black and Buono, we are often getting the same question. We have clients who are having trouble paying their bills and they want to know if homesteading their property will protect them from creditors in a lawsuit. We’ve decided to address this in our blog this week.

Massachusetts homestead laws are concerned with protecting a certain portion of the head of household’s property from being confiscated and sold to satisfy debts.

In March of this year, the Homestead Act was changed to allow an automatic homestead of $125,000 without the homeowner doing anything at all, this is an improvement over the past, when no protection was provided automatically. A declaration of Homestead provides for up to $500,000 of protection.

Many homeowners misunderstand the law and think that it provides much more protection than it actually does. For example, under the Homestead law, $125,000 of the equity in your home is protected. Meaning no forced sale can happen to satisfy "unsecured" creditors.

Notice, we said unsecured creditors. The homestead exemption does NOT protect you from secured creditors such as your mortgage holder.

If you stop making your mortgage payments, the bank can foreclose and sell your house. This can happen regardless of a homestead exemption because the mortgage is a voluntary secured lien, which means that you put up your home as collateral when you took out the loan.

However, the homestead law does protect you from unsecured creditors. Therefore, if your only financial asset was $125,000 equity in your home and you owed were sued for a $100,000 judgment the party suing you could not foreclose on your home to collect. Remember, the first $125,000 worth of equity in your home is protected by the Homestead law. The same works for Declaration of Homestead of$500,000 worth of protection.

However, in the above scenario, $125,000 of your home’s equity is protected, and you have $225,000 worth of equity in your home, the party suing you actually could force the sale of your home. In this case, you would receive $125,000 of the sale (which is protected) and they would keep the other $100,000 as payment.

Through these examples you can see the benefit of a Declaration of Homestead, which protects $500,000 of your homes equity.

Unfortunately, mortgage lenders are not the only secured creditors who are exempt from the homestead protection. Child support debts, condominium association dues, certain debts in bankruptcy filed by your spouse, and a few others.

The most important place that the homestead law has an effect is in bankruptcies. When homeowners are over their head in debt, many homeowners opt to stop paying other bills in order to continue with their mortgage payments. In other words, they stop paying unsecured debt, which they are protected from, to continue paying their secured debt, i.e mortgage, which they are not protected from.

Bankruptcy judges tend to be fairly lenient with the homestead exemption limit. In a bankruptcy court, the judge will let the homeowner keep their house if their mortgage payments are not delinquent and the equity in their home is $125,000 or less.

If your only asset is the equity in your home of $125,000 or less, the homestead law would most likely discourage someone from suing you. It may allow you to keep your home if you wind up in bankruptcy court. Declaration of Homestead would give you much more security.However, it will not protect you from all of your creditors.

If you are facing increasing debt, buying a new home, or have more questions regarding the Homestead Act, please contact Black and Buono in Framingham, MA.

In Massachusetts, so many residents are looking for a way to consolidate bills, lower their monthly payments and regain control of their finances. And it is not just the unemployed who are struggling; even those who are gainfully employed are having difficulty trying to make ends meet.

A mountain of debt is stressful and can lead you to make even more financially bad decisions. Calling or clicking on radio and internet ads promising you government debt consolidation relief is one of those bad decisions. Here is the situation: The government is not in the business of originating debt consolidation loans. Private companies are, and in exchange, they charge high fees and interest rates. When you hear a radio ad or see a banner ad extolling the virtues of the next government debt relief program, understand that the ad is being run by a for-profit private company and is using false advertising to trick stressed out consumers into thinking a government agency will be helping them instead of a for-profit business.

You can consolidate your debt by working with a debt consolidation company but you need to avoid the dishonest companies. Those companies that promise government loans or Obama debt relief are misleading consumers through advertising. Debt consolidation is a legitimate way to gain control over your credit card debt and there are companies that will consolidate all of your monthly debt into a single loan. However, having a lawyer who is experienced in debt consolidation and bankruptcy law can help you steer clear of these types of companies that are dishonest, or charge too high fees. A lawyer can negotiate with the issuers of your credit cards to eliminate a portion of your debt. At Black and Buono, we do not have interest rates and fluctuating fees to do this for you like the debt consolidation companies do. And we will get answers to important questions such as what financial penalties are levied against those who pay back their loans late. We will also have for you a written scheduled that shows exactly when your debt consolidation loan will be paid off when you make your payments on time every month.

When you are stressed and facing desperate times, bad decisions are made. With high unemployment, house values dropping and bankruptcy and foreclosure filings rising, more and more consumers are bound to click or call these companies making false claims. Know your options, and make good decisions. Get help with your credit card debt the right way. Good financial decision making and common sense starts with a phone call to Black and Buono at 877-619-5089.

With the increase in home heating costs and gas prices which have coincided with the dramatic drop in temperatures, our fuel costs to heat our homes and run our cars has dramatically increased. Couple this with rising taxes for new schools, sin taxes, the increases in costs for high school sports and the falling value of the dollar, Massachusetts residents have a perfect storm for being unable to meet the demands of the necessary costs to run our lives. Because of this, many of us have turned tocredit and credit cards. Increasing credit card interest and fluctuating interest payments on many home equity loans have made it a real challenge to buy groceries, never mind pay the bills that seem to keep growing.

At Black and Buono, we work hard to assist individuals in avoiding filing for bankruptcy relief whenever circumstances permit. We do this through direct negotiations with creditors and assisting individuals with credit card debt. If you are contemplating bankruptcy, we can help you determine your eligibility. If you live in Framingham, Worcester, Natick, Shrewsbury, or another town in Massachusetts, we can help you. Our expertise in bankruptcy support and credit counseling and our knowledge of federal bankruptcy laws has helped many families and individuals throughout the Commonwealth of Massachusetts. Contact us today, as a local firm we are proud of the individual attention and confidentiality which we provide to our clients.

The large majority of bankruptcy filings from senior citizens stem from credit card debt.

Only 7 percent of all bankruptcy cases filed in the U.S. between 1991 and 2007 were entered by people aged 65 and older, however, the demographic was the fastest-growing age group observed in a new study from the University of Michigan Law School. About two-thirds of these elderly consumers were forced to file for protection because their credit card debt was unmanageable; their debt was roughly 50 percent higher than it was for bankrupted consumers in other age groups.

There were a number of causes for these filings, the most common being senior citizens' reliance on credit cards to pay for medical expenses as their incomes decreased and became fixed, the report said. In addition, others had to deal with the death of a spouse who provided a secondary income.

In recent months, fewer Americans filed for bankruptcy as a result of insurmountable credit card debt. Fewer filings may signal improvement in the economy and rising consumer confidence.

There are some basic questions which we get asked every day about the Homestead Act. There is quite a bit of confusion out there regarding Homesteading and if you should or should not pursue a MA declaration of homestead.

An Estate of Homestead is a type of protection for your residence. The document is called a “Declaration of Estate of Homestead”. It allows homeowners in Massachusetts to protect their property up to five hundred thousand dollars of the value of the residence, per family. At Black and Buono, we will provide you a Declarations of Homestead for no additional fee.

Many ask how exactly this protects them. When you file a declaration of Homestead, your home which should be your principal residence, is protected against an attachment or levy. Therefore, you would not have to sell your home to satisfy debts to the extent of five hundred thousand dollars per residence, per family. The term “Family” in this law constitutes either parents or children, or if you own your home alone, a single owner of the home. In simple terms, if you get sued as a homeowner, you home is protected up to $500,000.

There are, however, certain situations even Homesteading cannot protect you from. These include Federal, state and local taxes, assessments, claims, and liens; mortgages used to purchase the residence; an execution issued from the Probate Court to enforce a spouse to pay for the support of a spouse or children; buildings on land not owned by the owner of a Homestead estate which have attachments or a levy, or are sold; upon an execution issued from a court based upon fraud, mistake, duress, undue influence or lack of capacity; debts contracted prior to the acquisition of the homestead.

At Black and Buono we understand that the Homestead Act is confusing and we offer counsel in regards to homesteading and if it is right for you. You should never make a financial decision if you are confused or unsure. Always consult with a real estate attorney if you have any questions. We are here to help, contact us today.

In today's economic climate, a growing number of us are suffering from negative ratings in our credit file such as delinquent payments, judgments, collections, foreclosures, and bankruptcies. Obviously this prevents us from obtaining new credit when we need it most. Black and Buono works hard to assist individuals and small businesses in avoiding filing for bankruptcy relief whenever circumstances permit. Our firm strives to assist the over-extended individual with compassion, professionalism and experience. Financial strain truly adds stress to your life and your marriage and family. Find assistance before too much of a toll is taken on your health, your life and your family.